PSC hears testimony on biomass power agreement

The Public Service Commission heard testimony on Wednesday regarding Kentucky Power Company’s proposal to purchase electricity from a planned biomass plant in Perry County.

Kentucky Power CEO Greg Pauley testified during the hearing in Frankfort that costly federal regulations led to the company’s decision to scuttle its coal-fired capabilities at the Big Sandy plant in Lawrence County. A plan to purchase renewable power from ecoPower Generation’s biomass plant, which will utilize waste wood products such as saw dust, wood chips, and low-quality logs to generate electricity, would replace more than 50 megawatts of power while also adding a renewable power source to Kentucky Power’s energy portfolio.

“This gives me some protection with regard to what’s happening with my continued use of coal,” Pauley testified. “I was 100 percent coal, and it’s very difficult, as you well know, to continue to burn coal with regard to all of the Environmental Protection Agency issues that are being addressed at the federal level and the impact on the state. This opportunity provided me to diversify. My opinion of it is this will become an even better decision for me later on down the road as those EPA impacts are administered.”

The company’s proposed agreement with ecoPower, the details of which have not been made public, is also an opportunity to contribute to the economic development of Eastern Kentucky, Pauley added. According to ecoPower’s own estimates, the plant would create 230 construction jobs over a two-year period, and 30 full-time jobs once the plant is operational in 2017. The company also noted 225 timber and trucking jobs would be created.

“Our relationship with them (ecoPower) with regard to this was that it was a new … economic development opportunity,” Pauley said, noting ecoPower first approached Kentucky Power Company about the proposal. “Obviously there were going to be jobs associated with it, and we focused on cost and the protection of our company in terms of diversifying our portfolio and jumping into the renewables.”

Pauley noted while responding to one question, however, that Kentucky Power has not performed its own analysis as to how many jobs the ecoPower plant might create.

If approved, the agreement will have an effect on the rates of Kentucky Power’s customers in Eastern Kentucky, Pauley confirmed, as the company estimates a 7 percent increase to residential rates. For an average customer, that would would be equal to $100 annually.

Kentucky Power can not move forward with the agreement with ecoPower until the PSC issues a decision, however, which could come as early as mid-autumn, according to Andrew Melnycovych, director of communications with the PSC.

“The applicants have requested a decision by mid-October due to certain contract and tax provisions, and the PSC will of course work to deliver a decision by the requested date,” Melnycovych said.

In a separate case, the Public Service Commission is additionally considering whether to approve a plan that would allow Kentucky Power to purchase a stake in a coal-fired plant in West Virginia which would replace a portion of the capacity lost when the units at Big Sandy are shut down. That case is currently awaiting a PSC decision, and if approved, Pauley said Kentucky Power officials plan to file an application to convert one of the two units at the Big Sandy plant to natural gas.

Wednesday’s hearing continued into the late afternoon, with several witnesses testifying before the commission. The hearing is scheduled to resume at 10 a.m. on Thursday.